As part of his new tax plan, the president has proposed ending the “step-up” in tax basis for inherited assets, and, furthermore, requiring the capital gains tax to be paid at death rather than when an heir later sells...
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- Details on the "Gang of Six" Plan
Details on the "Gang of Six" Plan
In March, Senator Mark Warner (D-VA), Saxby Chambliss (R-GA), Dick Durbin (D-IL), Kent Conrad (D-ND), Mike Crapo (R-ID) and Tom Coburn (R-OK) formed a group to tackle long-term budget reform; they referred to themselves the "Gang of Six." The six were motivated by the belief that to create a bipartisan deal, everything had to be on the table. Chambliss, for instance, said, "For a Republican to put revenues on the table is significant. For a Democrat to put entitlements on the table is significant. The only way we're going to solve this problem is to have a dialogue about all these issues, because there is no silver bullet."
While the "Gang of Six" earned supportive statements from their colleagues and other observers, they accomplished little for some time. Furthermore, the six senators remained very tight-lipped on any details regarding their proposal, leaving the public and many in Washington curious as to whether an actual solution along their lines was possible. Others began trying their own efforts, such as Vice President Biden's working group on the debt ceiling.
In May, when Senator Coburn announced he was dropping out of the group due to disagreements with Senator Durbin over discretionary and Medicare cuts, the whole thing appeared to be dead. Chambliss signaled that to make a deal work, "Coburn would have to be brought back into the fold," since he was a key conservative voice. As time went on, the now "Five Guys" fell out of the media.
Just when everyone seemed to give up hope on a bipartisan proposal, on July 19, a proposal emerged from the Gang of Six. They characterized it as a 10-year, $3.7 trillion deficit-cutting plan. Senator Chambliss reportedly had stayed close to Senator Coburn, "having dinner almost every evening" talking about "whether the left-for-dead Senate gang could really work." Coburn did indeed return to pitch the plan to his colleagues on Tuesday, exclaiming, "I'm back."
The plan's summary (PDF) states the following:
- $500 billion "down payment" spending reductions
- Shift to chained-CPI inflation measure government-wide, starting in 2012
- Impose statutory spending caps on discretionary spending through 2015
- Senate Finance Committee will have to cut $300 billion in health savings, while resolving how Medicare pays doctors, and is instructed to determine how Social Security can be made solvent for the next 75 years
- Senate committees are instructed to find $250 billion in cuts in other various departments
- Simplify the individual income tax code by broadening the tax base while reducing tax rates. The tax rates would be three brackets of between8-12 percent, 14-22 percent, and 23-29 percent, while maintaining or increasing the progressivity of the tax code. The tax base changes would reform, but not necessarily eliminate, tax deductions and credits for health, charitable giving, homeownership, and retirement
- Retain the Earned Income Tax Credit (EITC) and Child Tax Credit, or provide at least the same level of support for qualified beneficiaries
- Repeal the Alternative Minimum Tax (AMT)
- Change, in a revenue-neutral manner, the corporate tax rate to between 23 percent and 29 percent and switch from a worldwide to a territorial system
Since the release, the senators have been pitching their plan to build up support. They have received mixed reviews, including cautious optimism, eager support, and critiques, and not all along partisan lines. Republican Paul Ryan issued a statement skeptically asking questions about further details, and the top Democrat on the House Budget Committee, Chris Van Hollen, insisted on seeing details before he supports the plan. Positive statements have been issued by a number of individuals on the Hill and in the media (see, for example, Ezra Klein and Fox News). Former Bush-43 OMB official James Capretta savaged the plan in an op-ed. President Obama has praised the debt ceiling plan, although it is ultimately up to Congress what happens with it.
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